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how much are benefits worth?
Old 07-23-2008, 07:48 AM   #1
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how much are benefits worth?

I want to convert an hourly rate (no benefits) to a salaried rate with benefits. I've heard benefits are equal to roughly 28% or so of compensation. Is this true? Or is it more like 25%?
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 07-23-2008, 08:02 AM   #2
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Depends on what the benefits ARE, I'd think.

Instead of applying a percentage, I would figure out how much the benefits would cost me on the open market, if I had to arrange for them. For example, how much an annuity would cost that would be equal to the pension, or how much private health insurance would cost (with hefty inflation adjustments) as an individual.
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Old 07-23-2008, 08:05 AM   #3
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Would have to agree with W2R on this one, the only way to figure out what benefits are worth is to see how much it would cost you without them? Sometimes though it may be good to discount something, such as if you somehow get free gym membership which would cost $110 a month, but you would never pay that much in the first place, I wouldn't include the $110 a month fully into the cost. Yet again, just depends on what the benefits are and how much they would cost.
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Old 07-23-2008, 09:09 AM   #4
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Depends on the specific benefits and how comprehensive they are.

Also factor in the likelihood that these at least some of these benefits may be taken away or watered down in the future.
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Old 07-23-2008, 09:17 AM   #5
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what's been said, minus, of course, what you don't get.

i used to go for benefits but in retrospect that wasn't all too bright. for instance, i always had a company car. a few years before i quit they took the cars away. that put me out about $6k/year for car payments, insurance, gas, maintenance that i never before had to pay. besides that benefits can be taken away easier than salary because the company doesn't consider it a pay cut (they just consider it "change"), turns out i also lost out on the benefit of higher pay which would have contributed to company 401k matches, future social security benies & even a salary history which could be used to get the next higher paying job.

benefits only seem like a free bonus, but you pay for them regardless.
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Old 07-23-2008, 09:32 AM   #6
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There also might be tax considerations. If the straight hourly rate means you'll be receiving a 1099 as an independent contractor, you're on the hook for ALL the employment taxes. That means setting aside from each paycheck an amount for both income tax and the employment taxes, which total 15.30% (12.4% for Social Security and 2.9% for Medicare).

An overlooked benefit of being a salaried employee is that your employer pays half of these payroll taxes on your behalf. You have 6.2% for Social Security and 1.45% for Medicare deducted relatively painlessly from your gross wages each paycheck. When you're self-employed and paying all your own taxes, you have to be disciplined, set this money aside yourself, and send it in quarterly to the Treasury dept. Otherwise, you get a nasty surprise come tax time in April

My last job was as an independent contractor...I would set aside 30% of every paycheck for taxes (15% tax bracket on the income tax side plus the 15.3% employment taxes).
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Old 07-23-2008, 10:06 AM   #7
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Will they be subsidizing health? At that point, since health care is fixed per employee (the person making $10k and the person making $100k both cost the company $x/month), the percentage could vary quite a bit.

Also, are you W-2 hourly right now or 1099? If you're 1099, then keep in mind that they'll pay the employer side of taxes now (As Red Y pointed out)

I just did some calculations and my benefit varies between 20% and 30% based on salary (depending on if I get a bonus or not)... but that number assumes that I can't get medical coverage cheaper than my employer's group plan (and I probably could)
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Old 07-23-2008, 10:27 AM   #8
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My benefits are roughly 20% of my salary - but I don't purchase health insurance through my employer - the percentage would be higher if I did.
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Old 07-23-2008, 10:42 AM   #9
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By way of echoing W2R, I used to work for the State of Alaska. They had what they called their "loaded rate" which was the amount it cost them for an hour of an employees time. The loaded rate was 1.5 X the nominal rate.

Mind you, the benefits package was good. It included a defined-benefit retirement package (some of which was paid out of the employees nominal wage) which included health coverage upon retirement, the equivalent of the employer FICA contribution (although it went into a different program), leave, 80% of the medical premium, etc. etc. I assume it would have also included workman's comp and employment-security which I assume many employers have to pay even if they offer no other benefits (same is true of the employer FICA contribution).
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Old 07-23-2008, 01:16 PM   #10
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Our benefits are about 30% of our salary including 5 weeks of vacation, subsidized health care, 401(k) contributions and the employers part of SS. We get a annual mailing reminding us of that.
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Old 07-24-2008, 08:08 AM   #11
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Originally Posted by Marquette View Post
Also, are you W-2 hourly right now or 1099? If you're 1099, then keep in mind that they'll pay the employer side of taxes now (As Red Y pointed out)
I'm an hourly W-2 employee right now, so they already pay the employer taxes. The situation is that I'm talking with upper management about a potential promotion. I am part-time for various reasons, but primarily for quality of life issues - when I was full-time, it was very stressful physically and mentally on me. I am a physical therapist, and the caseload you are expected to carry can be very high. So, DH and I decided I would go part-time, and it has made both of us much happier.

I make an excellent rate as a part-timer. The full-time position I am being considered for (no offer has been made yet, but I am trying to prepare in case it does happen) is a non-clinical position. I would be responsible for multiple buildings and the position would require travel 2 to 3 days a week, working from home the other days. I would be doing Medicare compliance auditing/utilization review type of work and training staff on proper documentation. Hence, I wouldn't have the same physical demands on my body. Stress, however, would most likely increase. However, I am considering it, as I am not sure as I age how long I would be able to physically do my job (although we hope to FIRE before that becomes a huge issue).

Anyways, I want to know how to convert my hourly rate into a salary so I at least can use that as a baseline. I guess I could take my hourly rate and figure out what this equates into in terms of vacation/sick time. I'm already covered on DH's medical; I could figure out how much their medical would cost in comparison and subtract that out. I've already figured out how much their 50% match on the 401K would come out to. So I guess I could subtract all these amounts from what my hourly rate (@40 hours/wk) would be to see what my minimum salary would have to be for me to consider giving up my current gig. Does this make sense

BTW, if I am offered this position, take it, and then find it too stressful, I can always resign and get a clinical position again. Fortunately for me, I chose a field that is in such demand that I have no fears at all about job security.
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(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
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Old 07-24-2008, 10:33 AM   #12
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Originally Posted by simple girl View Post
Anyways, I want to know how to convert my hourly rate into a salary so I at least can use that as a baseline. I guess I could take my hourly rate and figure out what this equates into in terms of vacation/sick time. I'm already covered on DH's medical; I could figure out how much their medical would cost in comparison and subtract that out. I've already figured out how much their 50% match on the 401K would come out to. So I guess I could subtract all these amounts from what my hourly rate (@40 hours/wk) would be to see what my minimum salary would have to be for me to consider giving up my current gig. Does this make sense
This raises another salient point. It is important to remember that the medical benefits aren't worth nearly as much to someone who can already get coverage through their spouse's employer -- particularly if it's a relatively secure job they plan to stick with for a while -- as they would be to someone who would not have other coverage available. You may have to compare the quality of the benefits and how much extra payroll deduction (probably pre-tax) your husband would lose from the paycheck.
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Old 07-24-2008, 12:10 PM   #13
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So I guess I could subtract all these amounts from what my hourly rate (@40 hours/wk) would be to see what my minimum salary would have to be for me to consider giving up my current gig. Does this make sense
You have a complicated decision to make and I think it will end up being an emotional one as much as a financial one. I wish you all the best.

Since you do not work 40 hours a week today, you need to put an hourly rate on your free time. What about the price of your body's wear and tear in the current job v/s the prospective one?

You seem to have taken care of the basic benefits - healthcare, SS & Medicare payments, 401K match, but here are some others...

If you're going to be working from home, will they pay for your Internet connection, cell phone, give you a notebook computer, printer, office phone line etc., gas allowance or a car? Will you be able to deduct office space and car depreciation on your taxes? Will they pay for meals when you're traveling?

Time to create a spreadsheet, I think. If you do, please share. I'm sure others will be able to use it too & maybe refine further.

I read someplace that people are usually happier making a "change" decision than sticking with their current situation.

All the best.
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Old 07-24-2008, 01:22 PM   #14
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Sounds like the job change is bigger than the salary question, IMO. Is the travel bit just driving around to different local sites, or does it involve long-distance travel and hotels? You'd be devoting a lot more than 40 hours to your job in this case.

Is the job really what you're interested in? Are you looking to make more money to semi-retire sooner than 5 years from now? I guess I don't see a huge motivation if you're happy with part-time work, you get paid a high hourly salary, and DH's job provides for benefits. I'd like to be in that situation myself!

If it really is what you want to do, then I'm with the others in trying to figure out the monetary value of the benefits individually. Don't neglect taxes in the equation -- 25% or more is most likely coming off the top for federal taxes, plus the 7.65% for SS/Medicare (until you hit the $100k max or whatever it is now), plus state taxes plus local taxes if you have them. After figuring out all that, going full time might not be the huge financial boost you'd want in order to make it worthwhile.
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Old 07-24-2008, 01:23 PM   #15
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I am part-time for various reasons, but primarily for quality of life issues - when I was full-time, it was very stressful physically and mentally on me. I am a physical therapist...
SimleGirl, could you expand on this? I am getting PT right now, (in part becasue you suggested it!) and it seems that they tell me how to do an exercise, then watch me do it, possibly monitor my muscle contractions with fingers to see that I am doing it right.

To me it looks like the PT needs a lot of knowledge and skill, good observational abilities, good communication skills, but it doesn't seem like a very physical job. Do you sometimes do massage also?

BTW, it is slow going but definitely helps. This core training can be hard to learn well.

Ha
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Old 07-24-2008, 07:09 PM   #16
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Thanks so much everyone for taking the time to help me think this through. I'm going to reply to all here...hopefully it won't be too long-winded!

Quote:
Originally Posted by walkinwood View Post
You have a complicated decision to make and I think it will end up being an emotional one as much as a financial one. I wish you all the best.
So true!

Quote:
Originally Posted by walkinwood View Post
If you're going to be working from home, will they pay for your Internet connection, cell phone, give you a notebook computer, printer, office phone line etc., gas allowance or a car? Will you be able to deduct office space and car depreciation on your taxes? Will they pay for meals when you're traveling?

Time to create a spreadsheet, I think. If you do, please share. I'm sure others will be able to use it too & maybe refine further.
They will pay for cell phone, provide a lap top, and pay for mileage. Didn't ask about internet or printer; not sure if I could deduct these or if it would be worth the effort to track the expenses for a home office deduction - especially since I will be an employee (not sure if you can deduct these things when it isn't your own business).

I'm collecting my data and will share details for those who are interested. I hope I don't have to come back and say it was all for naught if they don't offer me the job, LOL, but I have no choice but to be prepared for an offer (so I can ask the right questions).

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I read someplace that people are usually happier making a "change" decision than sticking with their current situation.
Well yes, that is part of the feeling...just kind of feel like I need a "change" and a little curious about the adventure of it all (but darn scared, too, since gee I do have a pretty sweet situation right now with regards to pay and flexibility/freedom).

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Sounds like the job change is bigger than the salary question, IMO. Is the travel bit just driving around to different local sites, or does it involve long-distance travel and hotels? You'd be devoting a lot more than 40 hours to your job in this case.
It sounds like it is driving to sites that are in clustered area - a 2 or 3 hour drive, then you go to 3 or 4 sites there over several days during the week. There are some sites that would be a flight - I need to ask them at what point (hours of driving) I'd be allowed to take a flight instead. And yes, I'm concerned it would end up being a lot more than 40 hours a week. How do you ask that without sounding like you are lazy/don't want to put forth the extra effort, etc

Quote:
Originally Posted by Kronk View Post
Is the job really what you're interested in? Are you looking to make more money to semi-retire sooner than 5 years from now? I guess I don't see a huge motivation if you're happy with part-time work, you get paid a high hourly salary, and DH's job provides for benefits. I'd like to be in that situation myself!
Actually, the job really interests me. I'm a rare breed when it comes to therapists. I love to write, and I am very detail-oriented, and I'm also a rule follower. This makes me perfect for this position (I think...of course you never really know until you do the actual job). This also is what makes me stressed out when I am in a clinician role. I take a long time to write my notes. This, combined with the fact that I spend ALOT of time with my patients (as I am highly devoted to the patients I have and providing the absolute best care possible - can you tell I'm a perfectionist?) makes me a stressed out clinician when my boss expects me to see 3 to 4 pts/hour and be very productive. Uggh.

Well you people now know way more about me than I ever expected to share!

Quote:
Originally Posted by haha View Post
SimleGirl, could you expand on this? I am getting PT right now, (in part becasue you suggested it!) and it seems that they tell me how to do an exercise, then watch me do it, possibly monitor my muscle contractions with fingers to see that I am doing it right.

To me it looks like the PT needs a lot of knowledge and skill, good observational abilities, good communication skills, but it doesn't seem like a very physical job. Do you sometimes do massage also?

BTW, it is slow going but definitely helps. This core training can be hard to learn well.

Ha
Yes, I can explain. When I was an outpatient PT, I believed strongly in the value of manual therapy (in addition to appropriate exercise). So, I spent a great deal of time doing hands-on tasks - lots of deep massage, myofascial release, joint mobilization, and manual stretching of necks, backs, shoulders, hips (whew, that's exhausting), knees, and feet. I hurt my thumb terribly one time and ended up in a brace for weeks, had to get injections, etc. etc. I wasn't sure I would ever be pain-free or able to use my hands as a therapist again. I finally rehabbed myself to where I am painfree, but I am very careful in how I use my hands. I also switched to long-term care (working in a nursing home), but this has different challenges. Although I'm not lifting all day, by any means, there is some lifting, and although you are very careful in body mechanics, there are always risks of injuring yourself. The situation is complicated for me, since I did develop a nerve injury in my left leg when I was a new grad (many moons ago and lifted someone the wrong way). I have rehabbed that very successfully (I'm a workout-aholic now), but it is always lingering there and does flare up if I am not careful.

So that's a long-winded answer to your question! PT can be a very physical job depending on (1) the setting and (2) what type of treatment you believe works the best for your patients.

I hope you continue to improve! The core training definitely is tough to get a handle on. I'm a big believer in learning to selectively recruit the transversus abdominus...that's what the most recent research is really pointing to.



OK, maybe this post was long-winded. Tee-hee
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